Can I recover attorney fees if my long-term disability claim is governed by ERISA?

We regularly receive this question from disability claimants. The answer is YES, attorney fees are recoverable in ERISA long-term disability claims, but they are not guaranteed and the award is discretionary with the judge. The statute that gives courts the discretion to award attorney fees is 29 USC 1132 (g)(1) and it states in pertinent part, “In any action under this subchapter (other than an action described in paragraph (2)) by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney’s fee and costs of action to either party.” Disability carriers will always challenge an award of attorney fees.

The United States Supreme Court in the case of Hardt v. Reliance Standard has stated the following circumstances under which a court may award attorney’s fees:

a claimant must show some degree of success on the merits before a court may award attorney’s fees under § 1132(g)(1). A claimant does not satisfy that requirement by achieving trivial success on the merits or a purely procedural victory, but does satisfy it if the court can fairly call the outcome of the litigation some success on the merits without conducting a lengthy inquiry into the question whether a particular party’s success was ‘substantial’ or occurred on a central issue.

In addition to the above criteria a district court may also consider the following five factors in deciding whether to award attorney fees:

  1. the degree of opposing parties’ culpability or bad faith;
  2. the ability of opposing parties to satisfy an award of attorney’s fees;
  3. whether an award of attorneys’ fees against the opposing parties would deter other persons acting under similar circumstances;
  4. whether the parties requesting attorney’s fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA itself;
  5. the relative merits of the parties’ positions.

The following legal cases around the country discuss the established five factor test, Quesinberry v. Life Ins. Co. of N. America, 987 F.2d 1017, 1028-29 (4th Cir. 1993) (en banc), and other courts of appeals have used this test to determine whether to award fees. See Eddy v. Colonial Life Ins. Co. of America, 59 F.3d 201, 206-07 (D.C. Cir. 1995); Gray v. New Eng. Tel. & Tel. Co., 792 F.2d 251, 257-258 (1st Cir. 1986) (citing cases from Second, Third, Fifth, Eighth, Ninth, Tenth, and Eleventh Circuits adopting test); Sec. of Dept. of Labor v. King, 775 F.2d 666, 669 (6th Cir. 1985). The Seventh Circuit has used two tests, including the five-factor test, to determine whether fee awards in ERISA actions are justified. Bowerman v. Wal-Mart Stores, Inc., 226 F.3d 574, 592-93 (7th Cir. 2000) (describing five-factor test and “substantially justified” test). The Seventh Circuit does not consider the two tests to be meaningfully different. See id.

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There are 8 comments

  • Jan, you cannot take legal action against the LTD insurer to cover the costs of your legal fees.

    Jay SymondsJan 18, 2019  #8

  • I currently receive LTD benefits. In 2008 I hired a LTD attorney to appeal the first denial. Then January 2009 benefits stopped for an entire year. My attorney got my benefits restored in late 2009. The attorney gets 1/3 of my benefits every month. This is an ERISA claim. Can I take legal action against the LTD insurer to pay for my legal fees? I should receive the full benefit.

    JanJan 17, 2019  #7

  • Paul, you will need to discuss your questions with an account or tax professional to determine what you can do with respect to deductions.

    Stephen JessupJan 17, 2018  #6

  • I’m preparing my documents to file my 2017 return. My LTDI Attorney was able to get MetLife to recover backpay and restore my monthly payments. Can I deduct a percentage of attorney fees paid to litigate and recover 28 Months backpay owed and litigation to restore long term disability insurance payments?

    Paul D.Jan 16, 2018  #5

  • Kevin, no. There is no entitlement to attorney fees if you prevail at the administrative appeal level.

    Stephen JessupMay 5, 2017  #4

  • If my claim is covered by ERISA and I win an administrative appeal can I recover attorney fees?

    Kevin H.May 2, 2017  #3

  • KGT,
    An ERISA claimant never goes to court for an APPEAL as an appeal is a letter with supporting documents which is submitted directly to the insurance company. In 99% of the ERISA lawsuits a claimant also never has to court as the Judge will not allow testimony from the claimant.

    Gregory DellJan 2, 2013  #2

  • If a claimant has to go to court for an ERISA appeal do they “literally” have to sit in the courtroom? How can a disabled person sit in on a lengthy courtroom battle? Thank you.

    KGTDec 31, 2012  #1

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